Buying Real Estate in Mexico, all you need to know!

tommygn · #1 (**permalink**) 30th June 2012, 03:36 PM

I have taken the time to write this guide to buying property for expats, I know its a long post, but we have to keep in mind that this is intended to protect people´s estates.

I want you to be able to make the best decisions after you read this. This guide is about the legal process of selling/buying property. No recomendations on any particular area or type of property will be given. The best property is the one you like the most out of those which comply with the legal prerequisites.

Please feel free to add questions that I did not include in the original post.

Can I buy property in Mexico? What do I need?

YES you CAN! You do not need an FM2 nor an FM3 to buy property in Mexico. The only thing you actually need is your FORMA MIGRATORIA which you fill out when you get into Mexico legally. Even as a tourist you fill out this form before going through aduana.

Foreigners are allowed to own property in their own name in Mexico, provided it is 50 kms away from the coastline and 100 kms away from the north and south borders. In the case of property near the coast or border and only in that case, you need to buy it through a FIDEICOMISO (Trust fund). Do not use fideicomisos in other areas. It is unnesessary.

The general process of buying PROPERTY includes these steps, If you are employing the services of a REALTOR, make sure he/she is following these steps. If not, choose one that does!

1- Choosing a property, be sure to visit at least 5 options and compare them based on your criteria. You are the best person to determine that criteria, just make sure it is RATIONAL.

2- Buy proposal, generally (NOT NECESARILLY!) property closes 5 to 10% below asking price.

3- Due dilligence:

3.1-Be sure that the property´s “Escritura” (TITLE)is registered in the seller´s name. This is done in the “Registro Publico de La Propiedad (or RPP)” (PUBLIC TITLE REGISTRY). These registries are divided into hundreds of districts. To know which one the property is registered in, check the very last page of the Escritura. There should be a stamp with the inscription: “Inscrita en el Registro Publico de La Propiedad...” The numbers written there indicate the Escritura´s registry information.

3.2-When you go to the RPP ask them to make a “Consulta” you pay a small fee (Under $500 pesos) and you need to make sure the Escritura is in the seller´s name and that the property is not guaranting any debts, this is called GRAVAMEN and you want the property to be free of gravamen.

3.3-IF THERE IS A MORTGAGE it will be shown here as a gravamen. Don´t worry, of course the property can still be sold, but you need to make sure that the mortgage is declared on the Contrato de Promesa de Compraventa (SELLER´S AGREEMENT) and that the down payment is less than the owner´s equity on the property. Then the bank needs to provide a letter to the seller with instructions on how much to pay and how to cancel the mortgage. This letter should be presented to your NOTARIO (who will act as a title agency, see next step) and the money owed to the bank has to be paid to the bank, NOT the seller, as per the instructions on the bank´s letter.

3.4- Make sure the property does not owe PREDIAL (Property taxes) on the last 5 years, any taxes owed before that are prescribed and thus are not collectable by the government. Do the same check for water services. You check predial at the municipality and water at the municipality´s water company.

4- SELLER´S AGREEMENT (Contrato de Promesa de Compraventa) It is a contract that stipulates the buyer´s will and obligation to buy and the seller´s will and obligation to sell under certain conditions which include price, what is to be sold, when it is to be sold, what will happen if this is not sold and other conditions. The buyer generally pays about 20% or less of the property value when this is signed. Again, in the case that the seller still owes on the mortgage, only agree to down payments equal or less than his equity and pay the rest to the bank on the next step. Also, make sure that the seller´s address and penalty in case of not closing are very well described, as well as the term before you need to close. The seller´s penalty should include returning your down payment, PLUS a penalty fee, generally between 10 and 20% of the property´s value. The same penalty will apply to the buyer if he backs out.

4.1- Apply to the Secretaria de Relaciones Exteriores for permission to purchase. This is required of non-Mexicans. They want a copy of the Compraventa and old Escritura and charge a fee of around $5000 pesos.

5- CLOSING AND TITLING IN YOUR NAME- By now, you need to choose a NOTARIO (Public notary, who will act as a title agency). Be sure to pick it yourself, buyers have the right to choose their Notario. In the case of new developments it is best to go with the developer´s Notario, as the process in new property is much more complicated and their Notario already has everything on file.

5.1- Your Notario will go through the process of Due Dilligence described in steps 3.x. The reason you made your own due dilligence is to make sure the property was in order before the private seller´s agreement, and thus protect your down payment. Their Due Dilligence will include certifications on everything you checked on steps 3.x.

5.2- Closing costs. The Notario fees and titling taxes are to be paid by the buyer, the income tax is to be paid by the seller. Generally closing costs are between 6 and 8% of the property´s value and are to be paid by the buyer.

5.3- Closing, both the buyer and seller will be schedulled to apear before the Notario, and the buyer will pay the seller, both will sign the title and the Notario will give testimony of this and register the sale in the RPP, thus registering the title in the buyer´s name.

5.4- The Notario will present both parties with their invoices, which will include taxes and fees. This amount should have been previously anounced to both parties by the Notario. If you already have your closing apointment and you don´t know this, ask your Notario what your closing cost will be to the cent. Best way to pay for this is a cashier´s check.

6- ENJOY YOUR LITTLE PIECE OF MEXICO!!!

TundraGreen · #2 (**permalink**) 30th June 2012, 04:25 PM

Very helpful summary. Thanks.

I would add one point. When I purchased in Jalisco, I had to apply to the Secretaria de Relaciones Exteriores for permission to purchase. This was required of non-Mexicans. They wanted a copy of the Compraventa and old Escritura and charged a fee of around $5000 pesos.

tommygn · #3 (**permalink**) 30th June 2012, 04:27 PM

Quote:

Originally Posted by TundraGreen

Very helpful summary. Thanks.

I would add one point. When I purchased in Jalisco, I had to apply to the Secretaria de Relaciones Exteriores for permission to purchase. This was required of non-Mexicans. They wanted a copy of the Compraventa and old Escritura and charged a fee of around $5000 pesos.

Yep, left that one out!

I would add it as point 4.1

circle110 · #4 (**permalink**) 30th June 2012, 04:36 PM

Might I suggest that TundraGreen edit the original post and add that 4.1 point and fix the couple of typos. Then it would be worthy of being put into the "Mexico FAQ" sticky.

TundraGreen · #5 (**permalink**) 30th June 2012, 05:05 PM

Quote:

Originally Posted by circle110

Might I suggest that TundraGreen edit the original post and add that 4.1 point and fix the couple of typos. Then it would be worthy of being put into the "Mexico FAQ" sticky.

Done.